Making the Most
of Your Money
Opportunity Costs:
the value of the next best alternative thing
What are the opportunity costs to going to a movie
instead of staying home and watching a DVD?
– money spent on movie
– comfort you forgo by not staying home
Financial Goals
• Specific
• Measurable
• Reasonable and realistic
Figures taken from the 2013 U.S. Bureau of Labor Statistics
Occupation
People
Employed
Mean
Hourly
Wage
Annual
Salary
Retail Sales Worker
8,500,690
$11.39
$23,690
Office Clerk
2,832,010
$14.42
$29,990
Registered Nurse
2,661,890
$33.13
$68,910
Truck Driver
1,585,300
$19.68
$40,940
General and
Operations Manager
1,973,700
$55.81
$116,090
Prosthodontist
290
$61.69
$128,310
Mathematical
Technician
1,080
$28.97
$60,260
Astronomer
1,750
$53.09
$110,440
Model
5,470
$12.79
$26,600
Forest Fire Inspector
1,730
$19.54
$40,640
Spending Plan/Budget:
Expenses should never be more than income!
Sample Income:
• Money earned from a job
• Allowance
• Other Support
– Parents
– Family
Sample Expenses:
• Savings
• Food
• Entertainment
• Car Insurance
• Clothes
M&M Budgeting Game
• Sort M&Ms by color
• Each M&M is worth $5
• Write down the income or expense in the proper
category, along with the amount
• Total income and expenses
• Subtract total expenses from total income to get a final
outcome
Money
•
•
•
•
Cash
Debit Cards
Checks
Credit Cards
Gross Pay vs. Net Pay
• Gross Pay: The total amount that an employee earns
before taxes and other deductions
• Net pay or take-home pay: The amount the employee
receives after deductions
Gross Pay vs. Net Pay
The difference between gross pay and
net pay:
• Social Security taxes withheld
• Medicare taxes withheld
• Federal and State income tax withheld
• Other amounts withheld
Payroll, Federal and State Taxes
• Employees complete Form W-4
• Employers use Form W-4 to determine how much
income tax to withhold
• Employers withhold payroll taxes (Medicare / Social
Security), state and federal income tax from employees'
pay
• Employers send the amounts withheld to the federal and
state governments
W-2 Form
• View Form
• Form W-2 is used to report your wages for the year and
the taxes withheld from your income
Credit Cards
•
•
•
•
Compare rates
Compare fees
Is there a default or penalty rate?
What is the grace period before interest is applied?
Paying up front vs. paying with credit:
$5,000 Balance
APR
18%
Monthly
Payment
$100/month
18%
Years till paid Total amount
off
paid
7.5 years
$9,323
$150/month
3.9 years
$6,984
15%
$100/month
6.5 years
$7,896
15%
$150/month
3.6 years
$6,509
*Example information only.
Credit Bureau Information:
Three major credit bureaus
Fair Credit Reporting Act: ensures that the financial data
contained in your credit report is correct and private
–
–
–
–
You must be told if information is used against you
You may access your own file for free once a year
You can dispute inaccuracies
Outdated information must be removed
FICO Score:
$25,000 Auto Loan Example
FICO score
APR
720-800
690-719
670-689
650-669
630-649
610-629
580-609
520-579
3.95%
4.15%
5.74%
8.65%
12.14%
13.55%
16.70%
19.50%
*Example information only.
Monthly
payment
$460
$462
$480
$515
$558
$576
$618
$656
FICO scores range from 300-850
Score is based on several factors
Budget Worksheet
• You’ve been given $100
• You may spend the money anyway you want
• Make at least three purchases